Energy Bills Cut; Liberating Purse Strings and Business Cash Flow

7th March 2018.

Ofgem has proposed new rules that would lead to UK consumers saving £5 billion on energy bills over five years.

The Office of Gas and Electricity Markets (Ofgem) has announced a proposal to input strict price controls on energy costs. The proposals will lead to £15-£25 in savings per year for household consumers and 5 billion over five years. The new change will come into force in 2021 and will significantly reduce the profits energy network companies receive. While this will limit the amount networks can pay their shareholders, many consumers will benefit from the “tougher approach”. While these controls will not be implemented for another three years, they will be of significant aid for consumers and the extra cash could inspire a change in spending behaviour.

Since the hard Christmas last year, retailers have been suffering from disinterested consumers. Households have been continuously squeezed by a range of economic conditions, from interest rates to inflationary pressure, and as a result, budgets have tightened. Once this new proposal is launched, households could see themselves with a bit more cash to play around with, leaving an opening in the budget for retailers and small businesses. Until then, however, businesses should not neglect their cash flow, and credit managers are on hand to provide your business with the financial freedom to offset this spending slowdown.

Ofgem is insistent that the new initiative is more in line with the consumer’s needs, and urges network companies to start consulting with consumers about their business plans, to ensure that they are in line with what consumers want and are willing to pay for.

This new proposal is a somewhat response to an investigation that was conducted by Citizens Advice against network companies across the UK. The ensuing report found that companies had made £7.5 billion in “unjustified profits”.

Gillian Guy, chief executive at Citizens Advice is happy to the see the new initiative as a “major step forward”.

“These proposals should prevent a repeat of the billions in excess profits energy network companies are making under the current price controls. This means better value for consumers and potentially lower bills.”

ENA’s chief executive David Smith added that ENA was happy to set up consumer engagement groups to improve customer satisfaction.

Households are desperately trying to find some respite as rates are increased and wage growth continues at a glacial pace. Any squeeze on households are felt by business owners, particularly if they work within customer engaged sectors like retail or services sectors. This new proposal by Ofgem is a promising turn for households as many are gripped by skyrocketing energy bills during the cold winter months. In the meantime, while this proposal is being ironed out by the networks,  businesses and households should pay close attention to their financials to ensure they reach 2021.

At the Credit Protection Association, we aid many of our members with cash flow concerns. Particularly when you are met with hard times, it is important that you always have some cash tucked away in case another construction giant collapses. Our debt recovery services, as well as our credit management products, will free up cash to offset any slowdowns within your sector, as well as to ensure your position stays that way.

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

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